Reducing the Purchase Price Volatility of Commodities | 
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| Journal | Industrie Management |
| Issue | Volume 30, 2014, Edition 5, Pages 7-11 |
| Share | Cite | Download |
Abstract
Commodity prices are one of the key cost drivers in industrial enterprises. Due to the volatility of market prices they hold a significant risk for potential losses. The purpose of this paper is to demonstrate how a purchase department can reduce the volatility of commodity prices by implementing an active risk management. It is shown how to carry out a systematic review and assessment of commodity price risks and how to smooth short-term price fluctuations by using effective instruments.
Keywords
cash flow at risk, commodity price risk, diversification effects, Futures, Monte-Carlo-Simulation, options, risk management, Swaps
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Solutions: Risk Management
